"They are so cheap relative to every other investment grade security out there," Minerd told CNBC at the Milken Institute "State of the State" conference in Beverly Hills. He suggests they make up 20 percent of a fixed-income portfolio.

While state governments continue to make cuts, raise taxes, and beg for federal money, Minerd says the worst is over.

Thirty states reported revenue growth in the second quarter, Minerd said, and he thinks even California is starting to recover. Since so much of the Golden State's tax revenue is tied to capital gains, a rallying stock market translates to better days ahead.